Ordinance No. 12,2000 IZ D I N A N C" I -', N'(,-). 12,2(111
cm7 A-im cri,,N, (W "THE CITY CM: BAY 1XINNIN, -rivaNs,
AtTUHURIZING AND DIRECTINa wim crim mikNA(wit 1 EXE(.'LYFF, ANL) TIIE' CITY'
C:A,A`-R,K -1-(-) ATTES'l' 'F0 AN AGREEMENT AMR AIJ1,31TENC S F,.,RV JCL,", S WITII BF".J,'F
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m, ri, comismumn tw AA w unA, uCTUNCAI. (JF Al IE CAIII C)1 : 13AWMAKIN, rimmo
Secliml I: '10at the City Coti nil of the City
Manager to execute and the City Clerk to attem to an Agrcernent for Amlithig Services with Belt I ]art is PCCI-IaLek,
A coj>y, orsaid Agreement is muched herwo, marked U'-xhibit "A," and rnade as part hQrQofforcall intents arid
PLII-J-.WSeS.
S t! i,: ( i f.) a 1 2: 1 hart die City Council of the V"y of Haylomvn hereby autfum,izes I: ay Ici Bell I larris
Pcchucek, 1A A An 15r the IUNt year or the contrwict in an aniourn not to exceed 14 104 FTTW_SIX II IM TSY% 14 11 TWIC-)
HUNDRED rIAIITFY-I?JC3H,r mm iN(/100 1-)(,Jt-t,,A1CS ($96-231.00) lr.nr auarrt to [Ile 'it •-ej
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Section I hcrc(.A,.
Su tiara 3: . Fhal the, City Manager is Wicby Igranted gk�!noral mithority It,) approve a de cru"Ise cn all
increase in tums, by AMA Y 11 10USANI-)AND 5401100 13CILLARS 1.MCM)ME00) or less, prtmided thril OW 111110LInt
a uth or i Zed in Section 2 h0l-Q(,,,d'may not be inema,sed by "uwe thnn twenty-five percent (2551).
Section 4: 'I'his ordina"ce sha" lake Whel hinnedintely frcn" and after its passave by the of
me city" or isayin"n.
1101RUFALMED, READ, and PASSED by the afrinunuive vole MCI mite Ctluncil oftl-.ie City of'Ba± to%vn,
Ohs the 1 4" d4y of February, 201 3.
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Exhibit "A"
AGREEMENT FOR FINANCIAL AUDITING SERVICES
STATE OF TEXAS §
COUNTY OF HARRIS §
WHEREAS, the City of Baytown, hereinafter referred to as the "City," desires Belt Harris
Pechacek, LLLP, a Texas limited partnership, hereinafter referred to as the "Auditor," to perform the
audit of the financial statements of the governmental activities, the business -type activities, each
major fund, component units, and the aggregate remaining fund information, which collectively
comprise the basic financial statements of the City of Baytown, Texas, the Baytown Area Water
Authority ( "BAWA ") and all related entities, for the fiscal years ending September 30, 2013, 2014,
and 2015, hereinafter the "Agreement "; and
WHEREAS, the Auditor desires to perform such services under the terms and conditions
specified herein;
NOW THEREFORE, for and in consideration of the foregoing premises and the mutual
covenants and agreements herein contained, the Parties hereto do hereby mutually agree as follows:
I.
Auditor's Obligations
The Auditor shall diligently perform all services specified in Exhibit "A," which is attached
hereto and incorporated herein for all intents and purposes. These services shall be for the fiscal
years ending September 30, 2013, 2014, and 2015, and are expressly subject to the contingency
specified in Article IX. It is expressly understood and agreed that should there be a conflict between
the terms contained in Exhibit "A" and those contained in this Agreement, the terms of this
Agreement shall control.
The Auditor's services shall include the application of the standards issued by the AICPA
Auditing Standards Board (ASB), Statement on Auditing Standards (SAS).
The Auditor and the City understand and agree that this Agreement includes an option to
renew for an additional three years after the expiration of this Agreement on terms and conditions
acceptable to the parties at the time of the renewal.
II.
Fees
The Auditor hereby commits to performing the financial auditing services required herein by
the City's Director of Finance at a fee not to exceed the amount stated below for each audit, based
upon the actual time spent at the Auditor's standard hourly rate, plus travel and other out -of- pocket
costs:
Agreement for Financial Auditins Services. Page 1
Base Services J
2013
2014 -' --
2015
Financial Audit (9/30) _ ��
$ 45,460
$ 45,460 j
$ 45,460 !
Single Audit (Base) (9/30) _ _ . _..
2,741
- - 2,741
- -2,741
Single Audit. Major Program 1 (9/30) j
5,451
5,451 _
5,451
Single Audit - Major Program 2* (9/30)
_ 5,451
5,451
5,451 i
Single Audit - Major Program 3* (9/30)
5,451
_ - 5,451 j
_ 5,451
MDD (9i3o >_
- -- - --
- 2,836
2,836 J
- - -- - -
- -- 2,836
BAWA (9/30) _ _�
--
_ 6,989 J _ _ 6,989
6,989
Six -month Audit (Agreed upon Procedures)
8,376
8,376
8,376
Total _ _ _�
$ 82,755 $ 82,755
_ _$ 82,755
*Major Grant Programs, which are generally programs in which over $300,000 is expended during the fiscal
year, are required to be tested as major programs. Auditor's fees are based on the number of major programs.
The number of programs is not known at this time, but three programs have been listed for illustrative purposes.
Optional Services ! 2013 2014 f 2015 1
Preparation of City's CAFR ** J 8,989 1 8,989 1 8,989
-_
PreRarahon of BAWA's AFR � 4,494 -1 _ __4-,494 ______-1,494
- _
Total^ J $13,483_1 _$13,483 _ $13,483 j
* *Includes basic preparation of report (MD &A and transmittal narrative to be provided by the City, as well as
specific data). Optional continuing disclosure section not included.
The Auditor shall invoice the City each month as work progresses. The City shall, in turn,
pay the Auditor for its services actually performed within 30 days after receipt of an invoice or
receipt of services, whichever is later.
III.
Indemnity
THE AUDITOR AGREES TO AND SHALL INDEMNIFY, HOLD HARMLESS
AND DEFEND THE CITY, ITS OFFICERS, AGENTS AND EMPLOYEES
FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES, DAMAGES,
CAUSES OF ACTION, SUITS, AND LIABILITY OF EVERY KIND,
INCLUDING ALL EXPENSES OF LITIGATION, COURT COSTS, AND
ATTORNEYS' FEES, FOR DAMAGE TO ANY PROPERTY, LOSS OF
REVENUE, OR ANY OTHER INJURIES OR DAMAGES ARISING OUT OF
OR IN CONNECTION WITH THE SERVICES PERFORMED BY THE
AUDITOR PURSUANT TO THIS AGREEMENT, THE CONDUCT OR
MANAGEMENT OF THE AUDITOR'S ACTIVITIES, OR FROM ANY ACT
OR OMISSION BY THE AUDITOR, ITS AGENTS, EMPLOYEES, OR
SUBCONTRACTORS, WHERE SUCH DAMAGES, LOSSES OR INJURIES
Agreement for Financial Auditing Services, Page 2
ARE CAUSED BY THE JOINT OR SOLE NEGLIGENCE OF THE AUDITOR.
IT IS THE EXPRESSED INTENTION OF THE PARTIES HERETO, BOTH
THE AUDITOR AND THE CITY, THAT THE INDEMNITY PROVIDED FOR
IN THIS PARAGRAPH IS INDEMNITY BY THE AUDITOR TO INDEMNIFY
AND PROTECT THE CITY FROM THE CONSEQUENCES OF THE
AUDITOR'S SOLE OR JOINT NEGLIGENCE. FURTHERMORE, THE
INDEMNITY PROVIDED FOR IN THIS PARAGRAPH SHALL HAVE NO
APPLICATION TO THE CITY FOR ANY CLAIM, LOSS, DAMAGE, CAUSE
OF ACTION, SUIT AND LIABILITY WHERE THE INJURY, LOSS OR
DAMAGE RESULTS FROM THE SOLE NEGLIGENCE OF THE CITY,
UNMIXED WITH THE FAULT OF ANY OTHER PERSON OR ENTITY.
In the event that any action or proceeding is brought against the City by reason of any matter
from which the City is indemnified herein, the Auditor further agrees and covenants to defend the
action or proceeding by legal counsel acceptable to the City. This article shall survive the expiration
or termination of this Agreement.
IV.
Payment
The City shall pay the Auditor only for services actually performed and accepted. Such
payment shall be within thirty (30) days after the City's receipt of an invoice for such services or
upon receipt and acceptance of the services, whichever is later. Any payment terms provided for in
Exhibit "A" are superseded by this Article, regardless of any conflict.
V.
Release
By this Agreement, the City does not consent to litigation or suit, and the City hereby
expressly revokes any consent to litigation that it may have granted by the terms of this Agreement
or any other contract or agreement, any charter, or applicable state law. Nothing herein shall be
construed so as to limit or waive the City's sovereign immunity. The Auditor assumes full
responsibility for its work performed hereunder and hereby releases, relinquishes and discharges the
City, its officers, agents, and employees from all claims, demands, and causes of action of every
kind and character, including the cost of defense thereof, for any injury to or death of any person
(whether they be either of the parties hereto, their employees, or other third parties) and any loss of
or damage to property (whether the property be that of either of the parties hereto, their employees,
or other third parties) that is caused by or alleged to be caused by, arising out of, or in connection
with the Auditor's work to be performed hereunder. This release shall apply with respect to the
Auditor's work regardless of whether said claims, demands, and causes of action are covered in
whole or in part by insurance.
Agreement for Financial Auditing_ Services, Page 3
VI.
Insurance
Throughout the term of this Agreement, the Auditor at its own expense shall purchase,
maintain and keep in force and effect insurance against claims for injuries to or death of persons or
damages to property which may arise out of or result from the Auditor's services, whether such
services be by the Auditor, its agents, representatives, volunteers, employees or subcontractors or by
anyone directly or indirectly employed by any of them, or by anyone for whose acts any of them
may be liable.
The Auditor's insurance coverage shall be primary insurance with respect to the City, its
officers, agents and employees. Any insurance or self - insurance maintained by the City, its officials,
agents and employees shall be considered in excess of the Auditor's insurance and shall not
contribute to it. All coverage for subcontractors shall be subject to all of the requirements stated
herein.
The following insurance shall be required under this Agreement and shall meet or exceed the
minimum requirements set forth herein:
1. Commercial General Liability
• General Aggregate: $2,000,000
• Per Occurrence: $1,000,000
• Coverage shall be at least as broad as ISO CG 00 02 12 07
• No coverage shall be deleted from standard policy without notification of
individual exclusions being attached for review and acceptance.
2. Business Automobile Policy
■ This coverage shall be required only if the Auditor provides vehicles for its
employees.
• Combined Single Limits: $1,000,000
• Coverage for "Any Auto"
3. Errors and Omissions
• Limit $1,000,000
• Claims -made form is acceptable. Coverage will be in force for two years
after services are completed and accepted by the City
4. Workers' Compensation
• Statutory Limits
• Employer's Liability $500,000
• Waiver of Subrogation required.
Prior to any services being performed, the Auditor shall file with the City valid Certificates
of Insurance and endorsements acceptable to the City. Such Certificates shall contain a
provision that coverage afforded under the policies will not be canceled, suspended, voided,
Agreement for Financial Auditing Services. Page 4
or reduced until at least thirty (30) days' prior written notice has been given to the City via
certified mail, return receipt requested.
The Auditor shall also file with the City valid Certificates of Insurance covering all
subcontractors.
The following are general requirements applicable to all policies:
➢ AM Best Rating of A -; VII or better.
➢ Insurance carriers licensed and admitted to do business in State of Texas will be
accepted.
➢ Upon request of and without cost to City of Baytown, certified copies of all insurance
policies and/or certificates of insurance shall be furnished to City of Baytown's
representative. Certificates of insurance showing evidence of insurance coverage shall
be provided to City of Baytown's representative prior to any work being performed at
the site.
➢ Liability policies must be on occurrence form.
➢ Each insurance policy shall be endorsed to state that coverage shall not be suspended,
voided, canceled or reduced in coverage or in limits except after thirty (30) days' prior
written notice by certified mail, return receipt requested, has been given to the City.
➢ The City, its officers, agents and employees are to be added as Additional Insureds to all
liability policies.
➢ Upon request and without cost to the City, certified copies of all insurance polices and /or
certificates of insurance shall be furnished to the City.
➢ Upon request of and without cost to City of Baytown, loss runs (claims listing) of any
and /or all insurance coverage shall be furnished to City of Baytown's representative.
VII.
No Assignment
The Auditor shall not sell, assign, or transfer any of its rights or obligations under this
Contract, in whole or in part, without prior written consent of the City.
VIII.
Termination
The City, besides all other rights or remedies it may have, shall have the right to terminate
this Agreement with or without cause upon ten (10) days' written notice from the City Manager to
the Auditor of the City's election to do so. Furthermore, the City may immediately terminate this
Agreement if the Auditor breaches the terms hereof. A breach of this Agreement shall include, but
not be limited to, the following:
1. failing to pay insurance premiums, claims or other charges;
Agreement for Financial Auditing Services, Page 5
2. failing to pay any payments due the City, State or Federal Government from the
Auditor or its principals, including, but not limited to, any taxes, fees, assessments,
liens, or any payments identified in this Agreement;
3. the institution of voluntary or involuntary bankruptcy proceeding against the
Auditor;
4. the dissolution of the Auditor;
5. the violation of any provision of this Agreement; and /or
6. the abandonment of the Agreement or any portion thereof and discontinuance of the
Auditor's services or any portion thereof, as determined by the City Manager.
Upon delivery of any notice of termination required herein, the Auditor shall discontinue all
services in connection with the performance of the Agreement. Within ten (10) days after receipt of
the notice of termination, the Auditor shall submit a final statement showing in detail the services
satisfactorily performed and accepted and all other appropriate documentation required herein for
payment of services.
IX.
Contingency
It is expressly understood and agreed by both the Auditor and the City that this Agreement
for fiscal years 2014 and 2015 are contingent upon funds being appropriated by the City Council of
the City of Baytown for financial auditing services. Should funds not be appropriated, this
Agreement shall become null and void and both parties shall be relieved of any and all obligations
hereunder without liability to the other party or to any other person or entity, with the exception of
the liabilities assumed by the Auditor pursuant to Articles III and V hereof.
X.
Notice
Unless otherwise provided in this Contract, any notice provided for or permitted to be given
must be in writing and delivered in person or by depositing same in the Unites States mail, postpaid
and registered or certified, and addressed to the party to be notified, with return receipt requested, or
by delivering the same to an officer of such party. Notice deposited in the mail as described above
shall be conclusively deemed to be effective, unless otherwise stated in this Contract, from and after
the expiration of three (3) days after it is so deposited.
For the purpose of notice, the addresses of the parties shall be as follows unless properly
changed as provided for hereinbelow:
Agreement for Financial Auditing Services, Page 6
CITY OF BAYTOWN
Attn: City Manager
P. O. Box 424
Baytown, Texas 77522 -0424
BELT HARRIS PECHACEK, LLLP
Attn: Robert Belt, CPA
3210 Bingle Road, Suite 300
Houston, TX 77055
Each party shall have the right from time to time at any time to change its respective address
and each shall have the right to specify a new address, provided that at least fifteen (15) days' written
notice is given of such new address to the other party.
XI.
Non - waiver
Failure of either party hereto to insist on the strict performance of any of the agreements
herein or to exercise any rights or remedies accruing thereunder upon default or failure of
performance shall not be considered a waiver of the right to insist on and to enforce by an
appropriate remedy, strict compliance with any other obligation hereunder to exercise any right or
remedy occurring as a result of any future default or failure of performance.
XII.
Choice of Law and Venue
This Agreement shall in all respects be interpreted and construed in accordance with and
governed by the laws of the State of Texas, regardless of the place of its execution or performance.
The place of making and the place of performance for all purposes shall be Baytown, Harris County,
Texas.
XIII.
Severability
All parties agree that should any provision of this Agreement be determined to be invalid or
unenforceable, such determination shall not affect any other term of this Agreement, which shall
continue in full force and effect.
XIV.
No Third -Party Beneficiaries
This Agreement shall not bestow any rights upon any third party, but rather, shall bind and
benefit the Auditor and the City only.
Agreement for Financial Auditing Services, Page 7
XV.
Entire Agreement
This Agreement contains all the agreements of the parties relating to the subject matter
hereof and is the full and final expression of the agreement between the parties.
XVI.
Ambiguity
In the event of any ambiguity in any of the terms of this Agreement, it shall not be construed
for or against any party hereto on the basis that such party did or did not author the same.
XVI1.
Authority
The officers executing this Agreement on behalf of the parties hereby represent that such
officers have full authority to execute this Agreement and to bind the party he represents.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in multiple
copies, each of which shall be deemed to be an original, but all of which shall constitute but one and
the same agreement, this day of , 2013.
CITY OF BAYTOWN, TEXAS
ROBERT D. LEIPER, City Manager
ATTEST:
LETICIA BRYSCH, City Clerk
APPROVED AS TO FORM:
IGNACIO RAMIREZ, SR., City Attorney
BELT HARRIS PECHACEK, LLLP, a
Texas Limited Partnership
Agreement for Financial Auditing Services, Page 8
ROBERT BELT, CPA
General Partner
STATE OF TEXAS
COUNTY OF HARRIS
Before me on this day personally appeared Robert Belt, in his capacity as the General Partner
of Belt Harris Pechacek, LLLP, on behalf of such limited partnership, known to me to be the person
whose name is subscribed to the foregoing instrument and acknowledged to me that he executed the
same for the purposes and consideration therein expressed.
SUBSCRIBED AND SWORN before me this day of , 2013.
Notary Public in and for the State of Texas
R :WarenlFiles\Contracts\Auditing ServiceslBelt Harris Auditing Services Agreement 2013- 15Revised.doc
Agreement for Financial Auditing Services. Page 9
Exhibit "A"
The Auditor shall provide the following services for and on behalf of the City of Baytown, Texas
(the "'City ") for the years ended September 30, 2013, 2014, and 2015. Specifically, the Auditor
shall audit the financial statements of the City's activities, the business -type activities, each major
fund, component units (MDD, CCPD, FCPEMSD, TIRZ and BAWA), and the aggregate
remaining fund information, which collectively comprise the basic financial statements of the
City as of and for the years ended September 30, 2013, 2014, and 2015. The Auditor will also
audit separately issued financial statements for BAWA in conformity with TCEQ reporting
guidelines.
The Auditor shall ensure that the required supplementary information ( "RSI "), such as
Management's discussion and analysis ( "MD &A "), accompanies the City's basic financial
statements. The Auditor will apply certain limited procedures to the City's RSI, principally
including of inquiries of Management, which as used herein shall mean the City /General
Manager ( "Management "), regarding the methods of measurement and presentation, which
Management is responsible for affirming in its representation letter. The following RSI is
required by generally accepted accounting principles and will be subjected to certain limited
procedures, but will not be audited:
1. Management's Discussion and Analysis
2. Budgetary Comparison Schedules
The Auditor shall subject the following supplementary information to the auditing procedures
applied in its audit of the basic financial statements and will provide an opinion on it in relation to
the basic financial statements:
1. Schedule of Federal Expenditures and Awards
2. Combining Statements and Schedules
In addition to these services and included in the fees specified in Article II of the Agreement, the
Auditor shall:
1. provide routine advisory services through phone calls, conferences or otherwise in
connection with incidental matters arising during the year;
2. draft the financial statements, including the Management's Discussion and
Analysis with input from Management;
3. handle normal correspondence from grantor, regulatory, or oversight agencies
related to the audit;
4. perform procedures to comply with the Public Funds Investment Act (Chapter
2256 local government code);
5. Print and bind (i) 40 hard copies of the financial reports and (ii) 15 hard copies of
the six month agreed upon procedures report and provide an electronic pdf copy
via e-mail and /or CD of all reports; and
Exhibit "A," Page 1
6. Make the annual financial report conveniently accessible on the Auditor's website
for affiliated organizations to view; provided such organizations accept a standard
legal disclaimer notification.
Audit Objectives
The objective of the audit is the expression of an opinion as to whether the financial statements
are fairly presented, in all material respects, in conformity with U.S. generally accepted
accounting principles and to report on the fairness of the additional information referred to herein
when considered in relation to the financial statements taken as a whole. The objective also
includes reporting on the following:
a. Internal control related to the financial statements and compliance with laws,
regulations, and the provisions of contracts or grant agreements, noncompliance
with which could have a material effect on the financial statements in accordance
with Government Auditing Standards; and
b. Internal control related to major programs and an opinion (or disclaimer of
opinion) on compliance with laws, regulations, and the provisions of contracts or
grant agreements that could have a direct and material effect on each major
program in accordance with the Single Audit Act Amendments of 1996 and OMB
Circular A -133, Audits of States, Local Governments, and Non - Profit
Organizations.
The reports on internal control and compliance will each include a statement that the report is
intended for the information and use of the audit committee, Management, specific legislative or
regulatory bodies, federal awarding agencies, and, if applicable, pass - through entities and is not
intended to be and should not be used by anyone other than these specified parties.
The Auditor's Audit will be conducted in accordance with U.S. generally accepted auditing
standards; the standards for financial audits contained in Government Auditing Standards, issued
by the Comptroller General of the United States; the Single Audit Act Amendments of 1996; and
the provisions of OMB Circular A -133, and will include tests of accounting records, a
determination of major program(s) in accordance with Circular A -133, and other procedures the
Auditor considers necessary to enable the Auditor to express such an opinion and to render the
required reports. If the Auditor's opinion on the financial statements or the Single Audit
compliance opinion is other than unqualified, the Auditor will fully discuss the reasons with the
City or the appropriate component unit in advance. If, for any reason, the Auditor is unable to
complete the audit or are unable to form or have not formed an opinion, the Auditor may decline
to express an opinion or to issue a report as a result of this contract.
Management Responsibilities
Management is responsible for establishing and maintaining internal controls, including
monitoring ongoing activities; for the selection and application of accounting principles; for the
fair presentation in the financial statements of the respective financial position of the
governmental activities, the business -type activities, the aggregate discretely presented
component units, each major fund, and the aggregate remaining fund information of the City and
Exhibit "A," Page 2
the respective changes in financial position and, where applicable, cash flows in conformity with
U.S. generally accepted accounting principles; and for federal award program compliance with
applicable laws and regulations and the provisions of contracts and grant agreements.
Management is responsible for the basic financial statements and all accompanying information
as well as all representations contained therein.
Management is responsible for management decisions and functions. As part of the audit, the
auditor will prepare a draft of the financial statements, schedule of expenditures of federal
awards, and related notes. In accordance with Government Auditing Standards, the City will be
required to review and approve those financial statements prior to their issuance and have a
responsibility to be in a position in fact and appearance to make an informed judgment on those
financial statements. Further, the City is required to designate a qualified management -level
individual to be responsible and accountable for overseeing the Auditor's services.
Management is responsible for making all financial records and related information available to
the Auditor, including identifying significant vendor relationships in which the vendor has the
responsibility for program compliance and for the accuracy and completeness of that information.
Management's responsibilities include adjusting the financial statements to correct material
misstatements and for confirming to the Auditor in the representation letter that the effects of any
uncorrected misstatements aggregated by the Auditor during the current engagement and
pertaining to the latest period presented are immaterial, both individually and in the aggregate, to
the financial statements taken as a whole.
Management is responsible for the design and implementation of programs and controls to
prevent and detect fraud, and for informing the Auditor about all known or suspected fraud or
illegal acts affecting the government involving (1) management, (2) employees who have
significant roles in internal control, and (3) others where the fraud or illegal acts could have a
material effect on the financial statements. The City's responsibilities include informing the
Auditor of the City's knowledge of any allegations of fraud or suspected fraud affecting the
government received in communications from employees, former employees, grantors,
regulators, or others. In addition, the City is responsible for identifying and ensuring that the
entity complies with applicable laws, regulations, contracts, agreements, and grants. Additionally,
as required by OMB Circular A -133, it is Management's responsibility to follow up and take
corrective action on reported audit findings and to prepare a summary schedule of prior audit
findings and a corrective action plan. The summary schedule of prior audit findings should be
available for the Auditor's review prior to the beginning of the Auditor's audit fieldwork.
Management is responsible for establishment and maintenance of a process for tracking the status
of audit findings and recommendations. Management is also responsible for identifying for the
Auditor previous audits of other engagements or studies related to the objectives discussed in the
audit objectives identified hereinabove. This responsibility includes relaying to the Auditor
corrective actions taken to address significant findings and recommendations resulting from those
audits or other engagements or studies. The City is also responsible for providing Management's
views on the Auditor's current findings, conclusions, and recommendations, as well as its
planned corrective actions, and the timing and format related thereto.
Exhibit "A." Page 3
Audit Procedures General
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements; therefore, the audit will involve judgment about the number of
transactions to be examined and the areas to be tested. The Auditor will plan and perform the
audit to obtain reasonable rather than absolute assurance about whether the financial statements
are free of material misstatement, whether from (1) errors, (2) fraudulent financial reporting, (3)
misappropriation of assets, or (4) violations of laws or governmental regulations that are
attributable to the entity or to acts by Management or employees acting on behalf of the entity.
Because the determination of abuse is subjective Government Auditing Standards do not expect
auditors to provide reasonable assurance of detecting abuse.
Because an audit is designed to provide reasonable, but not absolute assurance and because the
Auditor will not perform a detailed examination of all transactions, there is a risk that material
misstatements or noncompliance may exist and not be detected. In addition, an audit is not
designed to detect immaterial misstatements or violations of laws or governmental regulations
that do not have a direct and material effect on the financial statements or major programs.
However, the Auditor will inform the City and /or its component units of any material errors and
any fraudulent financial reporting or misappropriation of assets that comes to the Auditor's
attention. The Auditor will also inform the City and /or its component units of any violations of
laws or governmental regulations that come to the Auditor's attention, unless clearly
inconsequential. The Auditor will include such matters in the reports required for a Single Audit.
The Auditor's responsibility is limited to the period covered by the audit and does not extend to
any later periods for which the Auditor is not engaged as auditors.
The Auditor's procedures will include tests of documentary evidence supporting the transactions
recorded in the accounts, and may include tests of the physical existence of inventories, and direct
confirmation of receivables and certain other assets and liabilities by correspondence with
selected individuals, creditors, and financial institutions. The Auditor will request written
representations from the City's attorneys as part of the engagement through the City Attorney. At
the conclusion of the audit, the Auditor will also require certain written about the financial
statements and related matters representations from the City and /or its component units.
Audit Procedures - Internal Controls
The audit will include obtaining an understanding of the entity and its environment, including
internal control, sufficient to assess the risks of material misstatement of the financial statements
and design the nature, timing, and extent of further audit procedures. Tests of controls may be
performed to test the effectiveness of certain controls that the Auditor considers relevant to
preventing and detecting errors and fraud that are material to the financial statements and to
preventing and detecting misstatements resulting from illegal acts and other noncompliance
matters that have a direct and material effect on the financial statements. The tests, if performed,
will be less in scope than would be necessary to render an opinion on internal control and,
accordingly, no opinion will be expressed in the report on internal control issued pursuant to
Government Auditing Standards.
As required by OMB Circular A -133, the Auditor will perform tests of controls to evaluate the
effectiveness of the design and operation of controls that the Auditor considers relevant to
preventing or detecting material noncompliance with compliance requirements applicable to each
Exhibit "A." Page 4
major federal award program. However, the tests will be less in scope than would be necessary to
render an opinion on those controls and, accordingly, no opinion will be expressed in the
Auditor's report on internal control issued pursuant OMB Circular A -133.
An audit is not designed to provide assurance on internal control or to identify significant
deficiencies. However, during the audit, the Auditor will communicate to Management and those
charged with governance internal control related matters that are required to be communicated
under professional standards, Government Auditing Standards and OMB Circular A -133.
Audit Procedures- Compliance
As part of obtaining reasonable assurance about whether the financial statements are free of
material misstatement, the Auditor will perform tests of the compliance of the City and its
component units with applicable laws and regulations and the provisions of contracts and
agreements, including grant agreements. However, the objective of those procedures will not be
to provide an opinion on overall compliance and the Auditor will not express such an opinion in
its report on compliance issued pursuant to Government Auditing Standards.
Pursuant to OMB Circular A -133, the Auditor shall plan and perform the audit to obtain
reasonable assurance about whether the City and its component units have complied with
applicable laws and regulations and the provisions of contracts and grant agreements applicable
to major programs. The Auditor's procedures will consist of test of transactions and other
applicable procedures described in the OMB Circular A -133 Compliance Supplement for the
types of compliance requirements that could have a direct and material effect on each of the
City's major programs. The purpose of those procedures will be to express an opinion on the
City's compliance with requirements applicable to each of its major programs in the report on
compliance issued pursuant to OMB Circular A -133.
Audit Administration.
The Auditor will complete the appropriate sections of and sign the Data Collection Form that
summarizes the audit findings. The Auditor will provide copies of its reports to the City;
however, it is Management's responsibility to submit the reporting package (including financial
statements, schedule of expenditures of federal awards, summary schedule of prior audit findings,
auditors' reports, and a corrective action plan) along with the Data Collection Form to the
designated federal clearinghouse and, if appropriate, to pass - through entities. The Data Collection
Form and the reporting package must be submitted within the earlier of 30 days after receipt of
the Auditors' reports or nine months after the end of the audit period, unless a longer period is
agreed to in advance by the cognizant or oversight agency for audits. The Auditor will provide
information to Management as to where the reporting packages should be submitted and the
number to submit.
The audit documentation which the Auditor generates for the audits to be performed pursuant to
this agreement shall be the property of the Auditor and constitutes confidential information.
However, pursuant to authority given by law or regulation, the Auditor may be requested to make
certain audit documentation available to Oversight Agency for Audit or its designee, a federal
agency providing direct or indirect funding, or the U.S. Government Accountability Office for
purposes of a quality review of the audit, to resolve audit findings, or to carry out oversight
responsibilities. The Auditor will notify Management of any such request. If requested, access to
Exhibit "A;' Page 5
such audit documentation will be provided under the supervision of Robert Belt. Furthermore,
upon request and if required by law or regulation, the Auditor may provide copies of selected
audit documentation to the aforementioned parties. These parties may intend or decide to
distribute the copies or information contained therein to others, including other governmental
agencies. However, it is expressly understood and agreed that all work papers generated by the
City and /or its component units in conjunction with the audit shall remain property of the City
and /or its component units and shall not be disclosed without the express written consent of the
City.
The Auditor shall retain the audit documentation under this Agreement will be retained for a
minimum of five years after the report release or for any additional period requested by the
Oversight Agency for Audit. If the Auditor is aware that a federal awarding agency, pass- through
entity, or auditee is contesting and audit finding, the Auditor will contact the parties contesting
the audit finding for guidance prior to destroying the audit documentation.
R: IKaren\Files%Contracts\Auditing Services\Exhibit.doc
Exhibit "A," Page 6